Controlling your expenses requires a strategic approach to managing your finances. Without a plan, it’s easy to overspend and struggle with financial instability. Budgeting strategies provide a clear framework to track income, allocate funds efficiently, and ensure financial security. By implementing effective budgeting techniques, you can take charge of your spending and work toward achieving financial goals with confidence.

The first step in effective budgeting is understanding your income and expenses. Begin by listing all sources of income and categorising your expenses into fixed (rent, utilities) and variable (entertainment, dining out). This breakdown helps identify areas where you might be overspending. Many people underestimate their discretionary spending, making it crucial to track every expense to gain a realistic financial picture.

Once you have a clear overview of your finances, the next step is setting a budget that aligns with your financial goals.

50/30/20 rule

A senior data analyst at e-Tranzact International Plc, Adedamola Adedoyin, noted that the 50/30/20 rule was a popular method to deploy in budgeting.

He explained, “Where 50 per cent of income goes to necessities, 30 percent to wants, and 20 per cent to savings or debt repayment. Adjusting this model based on personal needs ensures that essential expenses are covered while leaving room for saving and responsible spending.

“Cutting unnecessary expenses is another crucial aspect of budgeting. Identify non-essential costs that can be reduced or eliminated, such as subscriptions, impulse purchases, or frequent dining out. Simple changes like cooking at home or opting for generic brands can make a significant difference. Additionally, setting spending limits on discretionary expenses ensures better control over finances without feeling deprived.

“In addition, consistency and discipline are key to successful budgeting. Regularly reviewing and adjusting your budget based on changes in income or expenses ensures it remains effective. Utilising budgeting apps or spreadsheets can help track progress and stay accountable. By staying committed to smart financial practices, you can maintain control over your expenses and build a strong financial future.”

Speaking with The PUNCH, a financial educator and convener of The BoardRoom, Kelechi Godfrey stresses the importance of budgeting in helping people control their expenses.

Godfrey noted, “Budgeting gives you a tailored idea of how your money should move. Imagine you are earning N100,000 a month.

“You know, it is easy to wake up and buy one thing, and it is N100,000. You can buy an item, and all your money is gone. And then you know you have to wait for the next 30 days before your next pay cheque to get the money. As much as what you bought is important, it has also limited you to certain things. Money is a very scarce resource.

“How are you going to spread the N100,000 you have over the next 30 days? That’s where budgeting comes in.”

Godfrey says the importance of budgeting cannot be overemphasised when discussing how to control expenses.

He said, “When people look for the importance of budgeting, this is how I explain it to them. When you wake up in the morning, the same way you plan your day is applicable to how you plan your money.

“If I earn N100,000 monthly, we have four weeks in a month; how do I plan to spend N20,000 to N25,000 every week? Now that is an idea. So, you see, in that N25,000, how much will I use for my transport when I am taking Uber, public transport, among others?”

According to him, this sort of financial planning improves the outcome and quality of life.

He continued, “People think it’s all about money because at this point, you know the things that are important to you.

“With your N25,000, if you calculate your expenses and see there is a spare N10,000 at this point, you can decide to hang out. At least spend N5,000 and save the rest. There are also days that we have so many expenses that you have to tell yourself that at this point I cannot afford to hang out with anyone.”

Godfrey pointed out that most individuals did not grasp the essence of budgeting, which was causing the growing problem of heavy expenses and spending sprees.

He added, “It is not as if you are being thrifty or cheap. Is it you planning your finances the same way you plan your daily life.”

In a similar vein, a personal finance coach, Tobore Olumoye, highlighted the crucial elements of budgeting in navigating a spending habit.

Olumoye said, “A budget is your plan for the money that is yet to come. A budget is more aspirational and futuristic. It is critical that you budget. For instance, you want to build a house, and you plan with five bathrooms, a bedroom, two living rooms, and others.”

Olumoye pegged the growing problem of expenses on not budgeting properly.

The finance coach added, “If you do not budget, you are building castles in the air; but a budget helps you bring everything into focus. It’s a desire, and how will you fund it?

“Remember the money has not come yet, so in budgeting you can clearly see whether you can achieve the monetary goals you have set.”

She stated that controlling one’s expenses leads to the ability to intentionally meet the needs that are of top priority on the goal list.

“So, let’s say you need to go to work. Your budget says, I am going to allocate N30,000 for the month to ensure I can go to work daily. Now here’s the thing: how do we budget?

“If you use the right budgeting template, it will show you. The first thing the budget template will ask is how much is coming. How much are you putting aside in savings? It asks, how much are you investing? You take all that out, and then the template tells you this is what you are left with, and how do you expend this balance?

“The template will remind you. You know you will eat? Remember your children’s bills; these are the things you need. These are the things you need frequently. When you are done allocating the money at the bottom, you have a total. This will be either negative or positive. That way you know whether your budget is realistic or in deficit.”

According to the financial experts, budgeting gives control over money and a clear picture of all financial needs and wants.

Meanwhile, Money Africa, in a newsletter, stated that controlling expenditures could be challenging, especially if one’s income was inconsistent.

It noted that setting specific financial goals, such as saving for a family vacation, a trip, or a new phone, can help you stay motivated to save money.

The firm re-emphasised the need to create a budget and stick to it, adding that it will help in keeping track of income and expenses and will also help in identifying areas where one can cut back on spending.

The personal finance firm also noted considerations for setting up automatic transfers to a savings account.


https://punchng.com/how-to-control-your-expenses-with-budgeting/